SDIC Securities initiated coverage on CR Beverage (02460), assigning a "Buy-A" rating with a 6-month target price of RMB 13.86 (exchange rate: 1 CNY = 1.1004 HKD). The report highlights CR Beverage as a market leader in purified water, with its flagship brand C'estbon maintaining a strong industry position.

As an essential consumer product, packaged water demonstrates stable long-term demand. The company's beverage portfolio spans three high-growth categories: tea drinks, fruit juices, and functional sports beverages, executing a dual-driver strategy of packaged water and beverages that enhances long-term competitiveness.

Key insights from SDIC Securities: 1. Growing health awareness is driving steady expansion in China's drinking water market. Larger bottled water formats and water dispensers are gaining traction for household and outdoor use, while smaller bottles remain popular for sports activities. 2. Euromonitor data shows China's bottled water market reached RMB 245 billion in 2024 (CAGR of 5.7% since 2016), with projected 2.75% growth to RMB 251.7 billion in 2025. As an industry leader, C'estbon is well-positioned to benefit from this expansion.

Financial performance highlights: - H1 2025 revenue declined 18.52% YoY to RMB 6.206 billion - Net profit attributable to shareholders fell 28.63% YoY to RMB 805 million - Packaged water segment revenue dropped 23.1% to RMB 5.25 billion, while beverages grew 21.28% to RMB 960 million - Beverage products now account for 15.4% of total revenue, with 14 new SKUs launched in H1

The company maintains extensive distribution channels including traditional retail, key accounts, specialty stores, educational institutions, entertainment venues, e-commerce, and food service. Its sponsorship of international sporting events as an official national team supplier enhances brand recognition.

Investment outlook: - Two new factories planned for H2 2025, including a Zhejiang facility expected to begin Q4 production - Projected 2025-2027 revenue growth: -11.97%, 6.61%, 8.64% - Projected net profit growth: -7.10%, 9.32%, 5.49% - 2025 peer average valuation: 21.49x

Risks include slower-than-expected demand recovery, new product development challenges, and intensifying industry competition.